Financial Advisors: Thinking About Selling Your RIA? Our Tips Will Help You Select the Firm That Is Best for You.
This article explores these topics:
- How an RIA’s culture and philosophy factor in to your decision
- The importance of the business model of the firm you sell to
- Why compatibility between your firm and the buyer’s firm includes a review of their technology
- The importance of having a strong support staff of the buyer’s firm
- Does the buyer’s firm have a strong online presence?
Introduction
Selecting the right RIA to sell your practice to is a major strategic decision that will impact you, your team, and your clients.
Your process for selecting the right RIA to sell to is similar to investors selecting the right financial advisor. In theory, investors will have more more money if they select the right financial advisor to oversee their financial future. They will have less money if they select the wrong financial advisor. Investors need to know the right screening questions.
The same is true when you are considering selling your RIA to another firm. You have to ask the right questions to make the right decisions. We can help you ask those questions.
Does the Buyer Have the Right Culture and Philosophy?
Selecting an RIA culture that fits your values and personality has several advantages. A positive fit makes it easier to support the way you want to work and treat your clients. A poor cultural fit can mean more hand-holding and stress—which also means less time for more enjoyable activities including spending time with family and friends. An enhanced lifestyle is just one of the benefits of getting it right.
A cultural and philosophical fit creates a solid foundation for a successful, long-term relationship.
How Does the RIA Firm Support Your Business Model?
Every RIA is going to have defining characteristics that have the potential to make you more marketable. Following are a few questions that should be difference-makers when you sell your practice with another RIA.
Is the firm an independent boutique? Independence means the RIA is owned by principals and not by a bank or insurance company. Boutiques are the fastest-growing segment of the financial services industry for a reason. Their focus is on their clients and not their shareholders.
Another form of support is transitional services. How does the RIA help you transition from an old business model to a new one that has a better design for the ways investors will find, research, and select financial advisors in the future?
Does the firm support a financial fiduciary business model? The fastest-growing firms support this model.
Does the firm support fee-only and fee-based financial advisors? Your preferred method of compensation may be an asset-based fee, but you may also be compensated with investment and/or insurance commissions.
Another important consideration is the bundling and unbundling of planning and investment services. For example, does the acquiring firm allow for the unbundling of financial planning as a separate service?
Does the RIA Firm Have the Right Combination of Professionals on Staff?
If your goal in selling your RIA is to leverage a larger back office support team, you want to ensure that the firm you are considering selling to has the right support staff in place to support your current clients as well as any new clients you bring on.
You may want to select the RIA firm that has the right balance between winning new clients and supporting current clients. The types of roles that support financial advisors include administration, marketing, compliance, operations, and product support (for example, tax, estate planning, insurance, and legal).
Does the RIA Firm Provide a State-of-the-Art Technology Platform?
At ViaWealth, we believe technology is the key to building successful, fast-growing practices. This is particularly true in an age that is placing increasing amounts of emphasis on digital services.
Providing your clients and team with the latest technology platforms to access and manage financial data shoud be a top consideration when you are contemplating the sale of your firm.
There are several categories of technology that will support your success when you provide planning and investment services to your clients:
- Sales funnel technology
- Financial planning software
- Client relationship management
- Performance measurement and reporting
- Portfolio management reports
- Document storage
- Data aggregation
- Risk management tools
How Does the RIA Firm Differentiate Itself in the Marketplace?
Financial advisors are easy to find and research on the Internet. What investors see determines who they contact. This is not an easy task for investors because a high percentage of advisors have similar characteristics. The more the RIA can differentiate its services and values, the more marketable the financial advisor is.
The ideal RIA you sell to will more than match what other firms have to offer and it should have have differentiating characteristics that create a competitive advantage. A unique selling proposition can be one way to introduce the RIA’s differentiating characteristics to investors.
How Does the RIA Firm Support the Digital Marketing Efforts of Its Financial Professionals?
The financial services industry is growing away from outbound marketing practices (cold calling and direct mail) and towards inbound marketing practices. This is a better approach to market financial services, since inbound marketing facilitates investors initiating contact (and it all starts on the Internet). Some key questions about digital marketing include:
- How does the RIA market itself on the Internet?
- Is the RIA’s website competitive with other advisor websites?
- How are advisors portrayed on the website?
Does the RIA provide the marketing support that you need to grow at a faster pace? You should make it a point to sell to ann RIA that provides the marketing resources you need to help you grow your clientele..
Since the future of marketing financial advice and services is based on inbound marketing principles, you will want to know how the RIA supports digital marketing: For example, how visible is the RIA on the Internet? Does this visibility produce significant amounts of traffic to its website? Does the RIA website convert visitors into qualified leads?
Does the RIA Firm Have a Competitive Fee Structure?
It will be important to understand the fee structure of the acquiring RIA and compare it to your existing fee structure.
What impact, if any, will a different fee structure have on your existing clients or will their current fee structure be grandfathered over as part of the acquisition?
Is the new firm’s fee schedule competitive with other RIAs for new clients coming into your book of business?
What are the minimum asset requirements for clients? Is it different than what you have used in the past and what, if any issues, would this have on recruiting new clients?
Conclusion
Selecting the right RIA firm to sell to should be a well-thought out process that isn’t rushed. Conducting thorough due diligence on the firm is critical to making the right decision.
If you’re considering selling your RIA to a forward-thinking firm, schedule an introductory call to learn more about ViaWealth’s acquistion strategy for independent RIAs.
